Lynn’s credit rating takes a hit

LYNN — The city’s bond rating has been lowered and its financial outlook termed negative, according to Moody’s Investors Service.

Following the recent borrowing of $9.5 million to fill this year’s budget deficit, Lynn’s creditworthiness has dropped one notch from A3to Baa1.

“The downgrade reflects the city’s ongoing structural imbalance and its need to issue deficit financing notes to plug budgetary gaps in fiscal 2018 and 2019,” the Moody’s report said. “The negative outlooks reflects our expectation that the city will continue to be challenged to effectively match recurring revenues with recurring expenditures. The outlook further incorporates the continued pressure from rising mandated education costs.”

Like a person’s individual credit score, a city’s bond rating describes its credit worthiness to potential borrowers and investors.

“The city is slightly more of a credit risk than it was before,” said David Jacobson, a Moody’s spokesman.

“The downgrade is a result of the policies and decisions which I inherited when I got elected which were part of the concerns I expressed throughout the campaign last year,” he said. “It’s not helpful for us as we work towards stabilizing the city’s financial situation.”

Kennedy declined comment.

The six-page report said the city’s financial challenges stem from rising school enrollment, increases in its share of school funding, and the state’s requirement that the city fix years of underfunding schools.

Moody’s said the city’s rating could rebound if it establishes a balanced operation, grows its reserves, or if income levels rise. But Moody’s also noted the city’s rating could be further lowered if its reserves drop, if there are imbalanced budgets, or there’s a failure to raise revenues or lower costs.

Despite the setback, McGee said he is focused on moving the city forward.

“Since I’ve taken office, I’ve made the city’s finances my number one priority,” he said. “Working with the City Council, the legislative delegation and the Baker administration, we were able to pass the deficit legislation which allow us to balance the budget. There’s a lot of work ahead and it will take time to restore the city’s health.”

Lynn’s bad news comes on the heels of better news in Revere. Earlier this month, Standard & Poor’s Global Ratings upgraded Revere to AA with a stable outlook, up from AA- rating.

Revere is benefiting from construction of thousands of apartments on the city’s waterfront that is attracting high-income residents, the report said.

Thomas GrilloThomas Grillo is an award-winning business reporter who has worked at Boston's major newspapers covering real estate trends including the emergence of Assembly Square in Somerville and chronicling the growth of Boston's Seaport District. Thomas covers Peabody and Lynnfield. Follow him on Twitter @BosBizThomas.